Lies Consumers Tell

I really like Paymnts.com. Read it every day. Love the content. But I really hate misleading headlines and questionable conclusions on market research. And Paymnts.com may be guilty on both counts.

The site recently ran the headline: 90% of Consumers Would Pay for Mobile Payment Options.

Nothing gets my BS-alert-o-meter buzzing like a vuvuzela at the World Cup like a “90% of consumers” statement.

Reading a little further, here’s what I found: 57% of consumers are interested in having mobile payments on their phone; 90% would pay for the service; 64% would switch carriers in order to have access to mobile payments services; 58% would switch banks in order to have access to mobile payments services.

I’m guessing here that it’s really 90% OF THE 57% that said that they’d pay for the service. Which, if I’m correct in my guess, would make it “51% of consumers would pay for mobile payment options.”

That’s a little more reasonable.  But still not realistic.

I am loathe to criticize or critique any other firm’s market research, and I hope that’s not what I appear to be doing. But the “57% of consumers are interested in mobile payments” is a far cry from what Forrester Research found in April 2010. According to Forrester, “18% of US online adults express interest in mobile payments.”

I don’t know who’s right. Personally, I tend to agree with whoever has the more conservative numbers. Why? Because consumers lie.

There are probably more reasons than the ones I came up with, but here are four of the most common lies that consumers tell (usually to market researchers) in particular order:

1. I’m going to tell everybody I know how great you are. Net Promoter Syndrome Sufferers should stop reading this post, because they’re not going to like this. On the other hand, it’s been said so many times in the past four or so years, that they’ve probably developed a keen ability to ignore this: The gap between the percentage of people who say that they’re likely to recommend your product or service and the percentage that actually do is huge. Survey someone right after a positive experience with a firm, and you’re just asking for an even bigger gap.

2. I make well-informed, carefully considered decisions. I’ve yet to do a consumer study, or seen one from anybody else for that matter, in which any significant percentage of consumers said “I had no rational or logical basis for why I chose the provider I did” or “I flipped a coin, threw a dart, or rolled the dice” or “The woman I talked had a nice blouse on”. Consumers will always tell you that their decisions are the result of intelligent thinking.

3. I’d switch providers for that one thing you just asked me about. If 57% of consumers are interested in mobile payments, why would a higher percentage be willing to switch carriers for the service? What about the fees they’ll get hit with for breaking their contract? When push comes to shove, consumers lie down and don’t do anything. In the world of financial services, the percentage of people who actually pick up and leave their bank because someone else has a service their current bank doesn’t have is small. Really small.

4. I’m willing to pay a lot of money for that if you build it/develop it. Sure, go ahead and ask me if I’d be willing to pay for some new product or service you’re thinking about. No skin off my back to tell you “yes.” But did you ask my wife if she’s going to let me pay for that product or service when you release it? 🙂 More seriously, though, in hypothetical situations, consumers are always more likely to say they’d pay for a service. But what happens when they’re presented with a real-life choice of five add-on services? They might have said in research they’d be willing to pay for one, but they didn’t say they’d be willing to pay for all five, at the same time.

But hey, don’t let me dissuade you from thinking that 90% of consumers would pay for mobile payment options.

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Mobile Payments' Killer App

The term “killer app” gets thrown around a lot, so here’s what I’m thinking it means when I use it: An app that drives a step function increase in the adoption of a technology.

Spreadsheets are the best example of a killer app that I know of.

It might be hard for many Gen Yers to imagine what the world was like before the Internet, let alone before PCs. But when PCs first arrived on the scene, their widespread adoption was not a slamdunk. After all, we had word processors for word processing (duh!) and mainframe and mini computers for geeky database stuff. But until PCs came along, people who had to work with a lot of numbers had to rely on an ancient device called a calculator.

Although calculators were pretty  good at making individual computations, people needed to make series of calculations and….you know all this already, don’t you?

And so the spreadsheet was born. And it was the spreadsheet that became the killer app that  led to the widespread adoption of PCs.

Roll the clock forward 30 years or so to 2010.

Payment alternatives have proliferated over the past decade. A new mobile payment technology seems to launch every day. Aite Group forecasts that mobile payments — which includes mobile bill payment, mobile P2P, mobile phone billing, mobile top-up, etc. — will reach US$214 billion by 2015.

In addition to the technology developments, regulatory changes are throwing wrenches in the payment stew. The Durbins of the world propose and create legislation that create uncertainty and diseconomies into the payments world.

What does this all add up to for consumers? Mass confusion.

What’s going to happen at the register or online  when we want to pay with one mechanism, but the retailer or merchant wants us to pay with another, and a third-party payments provider wants us to pay with a completely different alternative? Retailers and alternative payments provider will lure us with discounts and offers that align with their economic priorities, while  debit and credit card providers will dangle rewards and cash back in our faces. Which form of payment will consumers use?

We’ll probably use what we’ve always used. Millions of consumers make religious use of their credit cards to rack up points. And despite what you might have heard otherwise, debit card rewards programs will continue to proliferate, further cementing the use of debit cards among Gen Xers and especially Gen Yers (sorry retailers, but these folks — especially those at the younger end of the generation — don’t carry cash, and they don’t write checks).

It’s going to be confusing to figure out if the retailers’ and alternative payments providers’ offers are worth giving up our rewards and points.

What we’ll need is…..a calculator. A slightly more intelligent calculator than the one we used back in 1 B.C. (Before Computers), though.

The calculator I’m describing will evaluate the various payments for a particular transaction — and to be fair, we’re probably talking about a transaction whose dollar volume is in at least the three digit range (to the left of the decimal point, smart guy) — and recommend the best alternative for us, the consumers.

Who’s going to develop that calculator?

Actually, everyone, because technologically, we’re not talking rocket science. The problem is: Whose calculator will consumers choose to use?

All the payment providers will develop their own version of a calculator, and most likely — surprise, surprise — it will recommend their payment mechanism. (This will pose yet another test for financial institutions to prove whether or not they have their customers’ best interests at mind, or just their own bottom line — the true meaning of customer advocacy).

Riding in like white knights to save the day: PFM providers like Mintuit (Mint.com/Intuit — I’m going to get a phone call for this, you know), Yodlee, Geezeo, Strands, etc.

Increasingly, these firms’ interests are becoming more aligned with the financial institutions’ interests as each month goes by, so it might be harder for them to truly represent consumers’ interests. But the best opportunity to access a full (or, at least, fuller) picture of a consumer’s financial picture in order to recommend a payment mechanism rests with the tools these firms provide.

After accessing their mobile device to use the payment mechanism calculator, consumers will find it convenient to simply complete the transaction using their mobile device. And help make the forecasts for mCommerce (a subset of the overall mobile payments landscape) a reality.

Mobile payments — not just mCommerce — will grow rapidly over the next few years in the U.S. I’m quite confident in Aite Group’s forecast, because I know how it was developed (and helped, in part, to develop it). It’s partially driven by the identification of a segment of consumers — we call them the Smartphonatics — who will be the early adopters.

Smartphonatics don’t need to be convinced to use their mobile device to make mobile payments. But later adopters (I’m not talking about the laggards) could use a prodding — and a mobile calculator that helps consumers make smarter payment mechanism decisions can be a killer app to accelerate the adoption of mobile payments.